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Unformatted text preview: generally has more
information about the true ﬁnancial position and results of operations of the
entity than the absentee owner does.
Materiality. The magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the
judgment of a reasonable person relying on the information would have been
changed or inﬂuenced.
Misstatement. An instance where a ﬁnancial statement assertion is not in
accordance with the criteria against which it is audited (e.g., GAAP). Misstatements may be classiﬁed as fraud (intentional), other illegal acts such as noncompliance with laws and regulations (intentional or unintentional), and errors
Reasonable assurance. The concept that an audit done in accordance with
auditing standards may fail to detect a material misstatement in a client’s ﬁnancial statements. In an auditing context this term has been deﬁned to mean a high
but not absolute level of assurance.
Reporting. The end product of...
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